-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, sZrMRqRYLpibKaN6Kqj71JlEDCfmIrIZeTzbIaqO2K5ZIaXLPEPV9sGV6WraYVZM ZuuYv7tK6kyTuuzCk0rgJg== 0000031364-94-000004.txt : 19941214 0000031364-94-000004.hdr.sgml : 19941214 ACCESSION NUMBER: 0000031364-94-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941029 FILED AS OF DATE: 19941213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ECKERD CORP CENTRAL INDEX KEY: 0000031364 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 133302437 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04844 FILM NUMBER: 94564584 BUSINESS ADDRESS: STREET 1: P O BOX 4689 CITY: CLEARWATER STATE: FL ZIP: 34618 BUSINESS PHONE: 8133996000 MAIL ADDRESS: STREET 1: JACK ECKERD CORPORATION STREET 2: P O BOX 4689 CITY: CLEARWATER STATE: FL ZIP: 34618 FORMER COMPANY: FORMER CONFORMED NAME: ECKERD DRUGS OF FLORIDA INC DATE OF NAME CHANGE: 19700112 10-Q 1 10-Q FOR 3RD QUARTER ENDED OCTOBER 29, 1994 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Thirty-Nine Weeks Ended October 29, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------- --------- Commission File No. 1-4844 ECKERD CORPORATION (Exact name of registrant as specified in charter) DELAWARE 13-3302437 (State of incorporation) (I.R.S. Employer Identification No.) 8333 Bryan Dairy Road Largo, Florida 34647 (Address and zip code of principal executive offices) (813) 399-6000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of November 26, 1994 the following number of shares of Common Stock, $.01 par value, were outstanding: 32,104,727 (including 605,022 shares of Non-Voting Common Stock) -1- ECKERD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
Unaudited Audited ASSETS 10/29/94 1/29/94 - ------ --------- --------- Current assets: Cash and short-term interest bearing deposits $ 12,380 12,110 Receivables, less allowance for doubtful receivables of $5,000 and $5,000 98,894 92,672 Merchandise inventories 825,984 765,653 Prepaid expenses and other current assets 5,269 6,232 --------- --------- Total current assets 942,527 876,667 --------- --------- Property, plant and equipment, at cost 545,505 516,361 Less accumulated depreciation 248,553 239,025 --------- --------- Net property, plant and equipment 296,952 277,336 Excess of cost over net assets acquired, less --------- --------- accumulated amortization 33,526 31,594 Favorable lease interests, less accumulated amortization 159,785 177,803 Unamortized debt expense 39,142 38,779 Other assets 20,436 18,225 --------- --------- $1,492,368 1,420,404 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) - ---------------------------------------------- Current liabilities: Bank debit balances $ 16,180 40,974 Current installments of long-term debt 2,063 1,905 Accounts payable 326,700 363,136 Accrued expenses 207,210 164,064 --------- --------- Total current liabilities 552,153 570,079 --------- --------- Other non-current liabilities 98,934 76,361 Long-term debt, excluding current installments 978,653 952,986 Stockholders' deficit: Preferred stock of $.01 par value. Authorized 20,000,000 shares; none issued - - Voting common stock of $.01 par value. Authorized 96,481,272 shares; issued 31,463,033 and 31,031,811 315 310 Non-voting common stock of $.01 par value. Authorized 3,518,728 shares; issued 605,022 shares 6 6 Capital in excess of par value 233,634 225,560 Retained deficit (371,327) (404,898) --------- --------- Total stockholders' deficit (137,372) (179,022) --------- --------- $1,492,368 1,420,404 ========== =========
See accompanying notes to condensed consolidated financial statements. -2- ECKERD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA)
Thirteen Weeks Ended Thirty-Nine Weeks Ended ----------------------- ----------------------- 10/29/94 10/30/93 10/29/94 10/30/93 ---------- ---------- ---------- ---------- Sales and other operating revenue $1,061,704 972,675 3,246,434 3,009,022 --------- ------- --------- --------- Costs and expenses: Cost of sales, including store occupancy, warehousing and delivery expense 822,181 744,906 2,490,190 2,280,907 Operating and administrative expenses 215,476 212,200 649,089 632,146 --------- ------- --------- --------- Earnings before interest expense 24,047 15,569 107,155 95,969 Interest expense: Interest expense, net 21,514 23,296 66,515 83,249 Amortization of original issue discount and deferred debt expenses 1,896 1,865 5,287 5,442 --------- ------- --------- --------- Total interest expense 23,410 25,161 71,802 88,691 --------- ------- --------- --------- Earnings (loss) before income taxes and extraordinary item 637 (9,592) 35,353 7,278 Income tax provision 32 (455) 1,782 1,800 --------- ------- --------- --------- Earnings (loss) before extraordinary item 605 (9,137) 33,571 5,478 Extraordinary item-early retirement of debt and preferred stock, net of taxes - (2,421) - (30,084) --------- ------- --------- --------- Net earnings (loss) for the period 605 (11,558) 33,571 (24,606) Preferred stock dividends - - - 4,924 --------- ------- --------- --------- Net earnings (loss) available to common shares $ 605 (11,558) 33,571 (29,530) ========= ======= ========= ========= Earnings (loss) per common share: Earnings (loss) before extraordinary item $ .02 (.29) 1.04 .02 Extraordinary item - (.08) - (1.06) --------- ------- --------- --------- Net earnings (loss) per common share $ .02 (.37) 1.04 (1.04) ========= ======= ========= =========
See accompanying notes to condensed consolidated financial statements. -3- ECKERD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Thirty-Nine Weeks Ended ------------------------- 10/29/94 10/30/93 --------- --------- Cash flows from operating activities: Net earnings (loss) for the period $ 33,571 (24,606) Adjustments to reconcile net earnings (loss) for the period to net cash provided by operating activities: Extraordinary charge related to early retirement of debt and preferred stock - 31,184 Depreciation and amortization 57,784 65,194 Amortization of original issue discount and deferred debt expenses 5,287 5,442 Increase in receivables, merchandise inventories and prepaid expenses (76,737) (71,439) Increase (decrease) in accounts payable and accrued expenses (479) 85,289 Net cash provided by operating -------- ------- activities 19,426 91,064 -------- ------- Cash flows from investing activities: Additions to property, plant and equipment (69,382) (30,925) Sale of property, plant and equipment 1,484 37,419 Acquisition of certain drug store assets (12,022) (670) Net cash proceeds from sale of Vision Group 22,624 - Other 2,779 (4,765) Net cash from (used in) investing -------- ------- activities (54,517) 1,059 -------- ------- Cash flows from financing activities: Decrease in bank debit balances (24,794) (12,231) 14.5% preferred stock cash dividends - (4,924) Net additions to deferred payments for equipment 31,900 - Additions to long-term debt 842 714 Reductions of long-term debt (1,554) (2,626) Net additions under current credit agreement 25,811 674,211 Net reductions under prior credit agreement - (221,723) Redemption of 14.5% preferred stock - (75,000) Common stock sold in a public offering, net of expenses of sale - 64,868 Redemption of 13% subordinated debentures - (295,165) Redemption of senior notes - (168,000) Common stock issued for an acquisition 7,576 - Other, including deferred financing costs (4,420) (58,777) -------- ------- Net cash provided by (used in) financing activities 35,361 (98,653) -------- ------- Net increase (decrease) in cash and cash equivalents 270 (6,530) Cash and short-term interest bearing deposits at beginning of period 12,110 18,642 -------- ------- Cash and short-term interest bearing deposits at end of period $ 12,380 12,112 ======== =======
See accompanying notes to condensed consolidated financial statements. -4- ECKERD CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. ------- The condensed consolidated financial statements include the accounts of the Company and its subsidiaries all of which are wholly owned, and were prepared from the books and records of the Company without audit or verification and in the opinion of management include all adjustments (none of which were other than recurring accruals) necessary to present a fair statement of results for such periods. It is suggested that these condensed consolidated financial statements should be read in conjunction with the financial statements and notes filed as part of the Form 10-K/A report for the fiscal year ended January 29, 1994. The results of operations of the periods indicated should not be considered as necessarily indicative of operations for the full year. Note 2. ------- Substantially all inventories are determined on a last-in, first-out (LIFO) cost basis. At October 29, 1994 and January 29, 1994 inventories would have been greater by approximately $73.5 million and $66.1 million, respectively, if inventories were valued on a first-in, first-out (FIFO) cost basis. The cost of merchandise sold is calculated primarily on estimated inventory values and inflation rates based on physical inventories taken at all locations at least once during the fiscal year. Note 3. ------- Net earnings per common share calculations for the periods presented are after considering any preferred dividends paid on the Company's 14.5% cumulative redeemable preferred stock which was repurchased on July 15, 1993. The weighted average number of shares outstanding for the thirteen and thirty-nine weeks ended October 29, 1994 and October 30, 1993 were 32,422,000 and 32,297,000 in 1994 and 31,606,000 and 28,499,000 in 1993, respectively. Note 4. ------- Certain amounts have been reclassified in the audited condensed consolidated balance sheet to conform to the fiscal 1994 condensed consolidated financial statement presentation. (Continued) -5- ECKERD CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 5. ECKERD CORPORATION AND SUBSIDIARIES - ------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Thirteen Weeks Ended Thirty-Nine Weeks Ended -------------------------------- -------------------------------- 10/29/94 10/30/93 10/29/94 10/30/93 ---------- --------------------- --------- --------------------- Actual Actual Adjusted(A) Actual Actual Adjusted(A) ---------- --------- ----------- --------- --------- ----------- Sales $1,061,704 972,675 957,851 3,246,434 3,009,022 2,963,078 Cost of sales 822,181 744,906 737,584 2,490,190 2,280,907 2,255,223 Operating and admin- istrative expenses 206,995 204,849 198,205 624,830 606,096 589,385 Amortization of intangibles 8,481 7,351 7,317 24,259 26,050 25,947 --------- --------- --------- --------- --------- --------- Operating profit 24,047 15,569 14,745 107,155 95,969 92,523 Interest expense 23,410 25,161 24,686 71,802 88,691 87,266 Income taxes 32 (455) (732) 1,782 1,800 1,300 Earnings (loss) before --------- --------- --------- --------- --------- --------- extraordinary items 605 (9,137) (9,209) 33,571 5,478 3,957 Extraordinary items - (2,421) (2,421) - (30,084) (30,084) --------- --------- --------- --------- --------- --------- Net earnings (loss) 605 (11,558) (11,630) 33,571 (24,606) (26,127) Preferred stock dividends - - - - 4,924 4,924 Net earnings(loss) --------- --------- --------- --------- --------- --------- available to common shares $ 605 (11,558) (11,630) 33,571 (29,530) (31,051) ========= ========= ========= ========= ========= ========= Net earnings (loss) per common share before extraordinary item $ .02 (.29) (.29) 1.04 .02 (.03) Net earnings (loss) per ===== ===== ===== ==== ==== ==== common share $ .02 (.37) (.37) 1.04 (1.04) (1.10) ===== ===== ===== ==== ==== ==== Weighted average number of shares outstanding 32,422 31,606 31,606 32,297 28,499 28,251 Earnings before interest, income taxes, depreciation and amortization (EBITDA) $ 44,343 34,725 33,294 164,939 161,163 155,901 EBITDA, adjusted for comparability (B) $ 48,420 38,627 37,196 176,421 168,226 162,964 (A) The adjusted financial data is based on the historical financial statements of the Company, adjusted to give effect to the Company's sale of the Vision Group operations which was sold effective January 30, 1994, and the use of the net proceeds therefrom as if such transaction had occurred as of the beginning of the thirty-nine week period ended October 30, 1993. (B) Two financing transactions entered into in April and June of last year relating to the placement of certain inventory on consignment and the sale and leaseback of certain photo processing equipment negatively impacted the comparability of third quarter and thirty-nine weeks EBITDA with last year by approximately $175 for the third quarter and $4,419 for the thirty-nine weeks, respectively.
-6- ECKERD CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations The Company sold its Vision Group operations effective January 30, 1994. The following results of operations discussion will compare the third quarter and year-to-date of fiscal 1994 to the adjusted third quarter and year-to date of fiscal 1993 (thirteen and thirty-nine weeks ended October 29, 1994 and October 30, 1993) which gives effect to the Company's sale of the Vision Group operations. See "footnote 5 of Notes to Condensed Consolidated Financial Statements." Since the sale of Insta-Care Holdings, Inc. ("Insta-Care") was not consummated until November 15, 1994, the following results of operations discussion includes the operations of Insta-Care. The Company's sales and other operating revenue for the third quarter and year-to-date of fiscal 1994 were $1,061.7 million and $3,246.4 million compared to $957.9 million and $2,963.1 million in fiscal 1993, respectively, an increase of 10.9% for the third quarter and 9.6% year-to-date. Drug store prescription sales for the third quarter and year-to-date of fiscal 1994 were $550.3 million and $1,633.9 million, an increase of 16.7% and 16.1% over the third quarter and year-to-date of fiscal 1993. In addition, drug store front end sales increased 5.3% and 3.7% for the third quarter and year-to-date of fiscal 1994 over the same periods of fiscal 1993. Comparable drug store sales (stores open for one year or more) increased 9.4% and 8.4% for the third quarter and year-to-date of fiscal 1994, compared to a 5.2% and 5.4% increase for the third quarter and year-to-date of fiscal 1993. The increase in comparable drug store sales for third quarter and year-to-date was due to the increase in sales of prescription drugs resulting from sales related to third-party prescription plans and the Company's competitive cash pricing strategy. In addition, comparable drug store sales growth was positively affected by increased sales of non prescription items in the health, skincare, stationery and greeting card, convenience food and photofinishing categories resulting from increased marketing emphasis and shelf space for these categories. Total sales growth for the third quarter and year-to-date was positively affected by the growth in comparable drug store sales. Prescription sales as a percentage of drug store sales was approximately 53.3% and 51.7% for the third quarter and year-to-date of fiscal 1994 as compared with approximately 50.7% and 48.8% for the third quarter and year-to-date of fiscal 1993. The growth in prescription sales for the third quarter and year-to-date was primarily the result of increased third-party prescription sales and the Company's competitive cash pricing strategy. Third-party prescription sales increased to approximately 65.3% and 63.9% of the Company's prescription sales for the third quarter and year-to-date of fiscal 1994 from approximately 59.4% and 57.3% in fiscal 1993, respectively. The Company expects prescription sales to third-party payors, in terms of both dollar volume and as a percentage of total prescription sales, to continue to increase in fiscal 1994 and for the foreseeable future. Although contracts with third-party payors generally increase the volume of prescription sales and gross profit dollars, third-party payors typically negotiate lower prescription prices than those on non third-party prescriptions, resulting in decreasing gross profit margins on the Company's prescription sales. -7- Cost of sales and related expenses for the third quarter and year-to-date of fiscal 1994 was $822.2 million and $2,490.2 million compared to $737.6 million and $2,255.2 million in fiscal 1993, respectively, an increase of 11.5% and 10.4% for the third quarter and year-to-date. As a percentage of sales, cost of sales and related expenses were 77.4% and 76.7% compared to 77.0% and 76.1% for the third quarter and year-to-date of fiscal 1994 and 1993, respectively. The increase in cost of sales and related expenses as a percentage of sales primarily resulted from the continued increase in third-party prescription sales with typically lower gross profit margins than non third-party prescription sales. These factors were partially offset by a lower LIFO charge of $7.4 million compared to $9.3 million year-to-date for fiscal 1994 and 1993, respectively. Operating and administrative expenses for the third quarter and year-to-date of fiscal 1994 were $215.5 million and $649.1 million compared to $205.5 million and $615.3 million in fiscal 1993, respectively, an increase of 4.9% and 5.5%, respectively. As a percentage of sales, operating and administrative expenses decreased to 20.3% and 20.0% for the third quarter and year-to-date of fiscal 1994 from 21.5% and 20.8% for the third quarter and year-to-date of fiscal 1993, as a result of the higher sales in fiscal 1994 and lower costs as a percentage of sales in such expense categories as payroll, advertising and insurance. Non-cash, tax deductible amortization of intangibles included in operating and administrative expenses for the third quarter and year-to-date of fiscal 1994 and 1993 were $8.4 million and $24.2 million, compared to $7.3 million and $25.9 million, respectively, an increase of 15.1% and a decrease of 6.6%, respectively. Earnings before interest expenses were $24.0 million and $107.2 million for the third quarter and year-to-date of fiscal 1994, compared to $14.7 million and $92.5 million for the third quarter and year-to-date of fiscal 1993, an increase of 63.1% and 15.8%, respectively, primarily due to the increase in gross profit dollars as a result of higher sales and other operating revenue, and a decrease in operating and administrative expenses as a percentage of sales. Two financing transactions entered into in April and June of 1993 relating to the placement of certain inventory on consignment and the sale and leaseback of certain photo processing equipment negatively impacted the comparability of year-to-date earnings before interest expenses by $1.7 million with a corresponding positive impact on interest expense and had no impact on third quarter earnings comparability. Total interest expenses were $23.4 million and $71.8 million compared to $24.7 million and $87.3 million for the third quarter and year-to-date of fiscal 1994 and 1993, respectively, a decrease of 5.3% and 17.8%, respectively. The decrease was due primarily to the lower cost of debt for the Company after the June 1993 refinancing, the August 1993 initial public offering, the November 1993 9.25% Senior Subordinated Note issuance and the August 1994 amendment to the Credit Agreement which provided improved pricing. Income taxes for the third quarter and year-to-date of fiscal 1994 and 1993 were $.0 million and $1.8 million and $(.7) million and $1.3 million, respectively. Income taxes represent alternative minimum and state income taxes for the Company, and reflect the utilization of net operating loss carryforwards. As a result of the foregoing factors, the Company had net earnings before extraordinary items for the third quarter and year-to-date of fiscal 1994 of
-8- $.6 million and $33.6 million, or .1% and 1.0% of sales, compared with a net loss of $9.2 million and net earnings of $4.0 million, or (1.0%) and .1% of sales for the third quarter and year-to-date of fiscal 1993. At October 29, 1994 the Company operated 1,724 Eckerd Drug stores and 465 Eckerd Express Photo labs and Insta-Care Pharmacy Services a provider of pharmaceutical care to institutions. Financial Condition and Liquidity With respect to the balance sheet at October 29, 1994 compared to the balance sheet at January 29, 1994, merchandise inventories increased $60.3 million (net of the LIFO charge of $7.4 million) to $826.0 million, accounts receivable increased $6.2 million to $98.9 million and property, plant and equipment increased $29.1 million to $545.5 million. The sale of the Vision Group operations reduced inventories, receivables and property, plant and equipment by approximately $12.5 million, $2.6 million and $26.7 million, respectively. The inventory increase is a result of additional inventory needed to support strong sales and for the customary Christmas seasonal inventory buildup. The receivables increase is attributable primarily to the increase in third-party prescription sales and vendor promotions and allowances receivables. Additions to property, plant and equipment of $69.4 million were primarily due to the installation of point-of-sale product scanning equipment and satellite communications equipment along with other improvements to existing stores and facilities and the addition of new stores. Sales and retirements of fully depreciated assets were $13.5 million. On August 3, 1994, the Company completed an amendment to the Credit Agreement. The $850 million facility does not provide any additional proceeds to the Company, but it does provide improved pricing and increased operating flexibility with respect to acquisitions, capital expenditures and lease payments. The Revolving Loan facility was increased to $350.0 million and the six year amortizing Term Facility combined the Tranche A and B loans and was reduced to $500.0 million. The Term Facility is currently priced at LIBOR plus 1.5% (compared to 2.75% and 3.00% over LIBOR before the amendment) with future reductions in rates if the Company achieves certain debt levels and performance goals. At October 29, 1994, the Company had $602.0 million in borrowings outstanding under the Credit Agreement ($490.0 million under Term Loan borrowings, $90.0 million Revolving Loan borrowings and $22.0 million of banker's acceptances) and the Company had unused and available borrowing commitments thereunder of $157.7 million which is net of $80.3 million of letters of credit. The Term Loan commitment of $490.0 million amortizes in unequal quarterly payments and matures in full in July 2000. The Revolving Loan commitment of $350.0 million matures in full at the end of July 2000. At October 29, 1994 the Company had excess availability under the Revolving Loan commitment and accordingly did not treat the required amortization repayments as current. On October 29, 1994 the Company had working capital of $390.4 million and a current ratio of 1.7 to 1 compared to $306.6 million and 1.5 to 1 at January 29, 1994. Including the Company's year-to-date net earnings of $33.6 million and net loss of $24.6 million for fiscal years 1994 and 1993, respectively, cash flow provided by operating activities declined $71.6 million for fiscal -9- 1994 compared with fiscal 1993. This decline was principally due to the initiation of the inventory consignment program of approximately $52 million in the first quarter of fiscal 1993, the increase in accounts receivable related to third-party prescription sales and vendor promotions and allowances, and higher than normal cash payments to merchandise vendors in fiscal 1994 resulting in the reduction of accounts payable from an abnormally high balance at January 29, 1994 primarily from the timing of vendor payment due dates. Net cash from investing activities year-to-date for fiscal 1994 and 1993 used $54.5 million and provided $1.1 million, respectively. Uses of cash were principally for capital expenditures of $69.4 million and $30.9 million for fiscal 1994 and 1993, respectively, for additions to the Company's drug stores, and Express Photo units and improvements to existing stores. In addition, in fiscal 1994, additions to property, plant and equipment were for the installation of point-of-sale product scanning equipment and satellite communication equipment. In fiscal 1994, a source of cash to the Company from investing activities was provided by a partial payment for the sale of the Vision Group operations. In fiscal 1993 a source of cash to the Company from investing activities was provided by a sale and leaseback arrangement of photoprocessing equipment for approximately $35.0 million. Capital expenditures for fiscal 1994 are expected to total approximately $92 million. Funds for the cash capital expenditures are expected to come from cash flow from operating activities and available borrowings and other existing financing sources, if necessary. In addition, the Company is financing expansion or upgrade of photoprocessing equipment through five-year operating leases. Approximately $8.8 million has been financed as operating leases year-to-date for fiscal 1994. Such items were capital expenditures during the first quarter and part of the second quarter of fiscal 1993. Financing activities year-to-date for fiscal 1994 provided $35.4 million. Uses of cash were primarily for the reduction of $24.8 million of bank debit balances. Funds were provided by bank borrowings, the issuance of $7.6 million in common stock as partial payment for a drug store acquisition and $31.9 million deferred payments for equipment in fiscal 1994. Financing activities year-to-date for fiscal 1993 used $98.7 million. The primary use of funds relates to the net repayment of $12.6 million of debt, the redemption of the Company's 14.5% cumulative redeemable preferred stock and payment of dividends on such stock for an aggregate of $80.0 million, approximately $51.0 million in costs associated with the refinancing and 9.25% note issuance and the $12.2 million decrease in bank debit balances. These uses of funds were partially offset by $64.8 million of net proceeds from the initial public offering. The Company anticipates that the combination of amortization of intangibles and interest on debt will have a negative impact upon future earnings and, to a lesser degree, cash flow from operating activities. The Company does not believe, however, that the impact of such planned amortization and interest expenses upon earnings indicates a present or future impairment of liquidity. Based upon the Company's ability to generate cash flow from operating activities, the available unused portion of the working capital revolving credit loans under the Credit Agreement and other existing financing sources, the Company believes that it will have the funds necessary to meet the principal and interest payments on its debt as they become due and to operate and expand its businesses. -10- REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Company's independent public accountants have made a limited review of the financial information furnished herein in accordance with standards established by the American Institute of Certified Public Accountants. The Auditors' Report is presented on page 12 of this report. -11- Auditors' Report ---------------- The Board of Directors Eckerd Corporation: We have reviewed the condensed consolidated balance sheet of Eckerd Corporation and subsidiaries as of October 29, 1994 and the related condensed consolidated statements of operations and cash flows for the thirteen and thirty-nine weeks ended October 29, 1994. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of January 29, 1994, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows, for the year then ended (not presented herein); and in our report dated March 18, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 29, 1994 is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK LLP November 29, 1994 -12- PART II - OTHER INFORMATION Item 5. Other Information - -------------------------- On November 16, 1994 the Company announced that on November 15, 1994 it had completed its previously announced agreement to sell its Insta-Care subsidiary. Insta-Care supplies pharmaceutical services including prescription drugs and patient-record and consulting services to long term care institutions in New England and the Sunbelt. Insta-Care was sold to Pharmacy Corporation of America for a total consideration of $112 million in cash. The Company used the net proceeds of approximately $94 million, to reduce outstanding indebtedness. Of this amount the Company expects to redeem $50 million principal amount of the 11.125% Subordinated Debentures. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits 15.1 Letter re unaudited interim financial information 27 Financial Data Schedule (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the thirteen weeks ended October 29, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ECKERD CORPORATION ----------------------- (Registrant) /s/Samuel G. Wright December 12, 1994 - ----------------- ----------------------------------- Date Samuel G. Wright Senior Vice President-Finance (Principal Accounting Officer) -13- Exhibit Index ------------- Eckerd Corporation Form 10-Q Exhibit No Description of Exhibit Page - ---------- ---------------------- ---- 15.1 Letter re unaudited interim financial information 15 27 Financial Data Schedule 16 -14- EX-15 2 LETTER: KPMG PEAT MARWICK, ACCOUNTANT'S AWARENESS EXHIBIT 15.1 Eckerd Corporation and Subsidiaries 8333 Bryan Dairy Road Largo, FL 34647 Gentlemen: Re: Registration Statement on Form S-3 (No. 33-50223) Registration Statement on Form S-8 (No. 33-49977) Registration Statement on Form S-3 (No. 33-10721) Registration Statement on Form S-8 (No. 33-50755) Registration Statement on Form S-3 (No. 33-56261) With respect to the above referenced registration statements, we acknowledge our awareness of the incorporation by reference therein of our report dated November 29, 1994 related to our review of interim financial information, which report was included in the Form 10-Q of Eckerd Corporation and Subsidiaries for the thirty-nine weeks ended October 29, 1994. Pursuant to Rule 436(c) under the Securities Act of 1993, such report is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. Very truly yours, KPMG PEAT MARWICK LLP Tampa, Florida November 29, 1994 -15- EX-27 3
5 0000031364 ECKERD CORPORATION 1,000 9-MOS JAN-28-1995 OCT-29-1994 12380 0 103894 5000 825984 942527 545505 248553 1492368 552153 978653 321 0 0 (137693) 1492368 3246434 3246434 2490190 2490190 644704 4385 71802 35353 1782 33571 0 0 0 33571 1.04 1.04
-----END PRIVACY-ENHANCED MESSAGE-----